Lessons from Toyota’s IT Strategy

There are some interesting lessons from Toyota’s IT Strategy in the minutes from the Third IT Economics Salon of the Economic and Social Research Institute which is part of the Cabinet Office of the Japanese Government. The guest speaker was Hiroaki Yoshida, a Toyota executive who spoke on the topic of “Toyota Motor’s IT Strategy” on May 10, 2001.
Yoshida gives examples of the impact of IT on Toyota’s product development process in the reduction in product development lead-time, the digitization of design documents, and the computer simulation capability both of the design of parts as well as the assemblability. There is an interesting discussion of how Toyota viewed (ca 2001) their planned electronic kanban integration with their suppliers as well as applying IT on the customer end.
Here are some excerpts from the meeting minutes that provide lessons from Toyota’s IT Strategy:
We recognize that we have to take our traditional global vision and change it based on the influence of IT implementation. Our strategy is to retain the good Toyota DNA and learn what we can from overseas, transform our processes so that we can utilize the internet to the fullest.
On barriers to IT implementation
We think the greatest barriers to IT implementation are rules, culture, traditions and the common sense in our company that “this is the way we’ve done things.”
On the Toyota Production System
The kanban system is a commonly known methodology of the Toyota Production System, but kanban is only a part of the Toyota Production System. The Toyota Production System is a corporate culture that encompasses labor management. Essentially, we place importance on the accumulation of kaizens.
On kaizen and kaikaku
In terms of the difference between kaizen and kaikaku, kaizen is culture. If you don’t have that and you attempt kaikaku you will probably fail, and will certainly not sustain. If you improve by 1% each month, this leads to a kaikaku of 300% in 10 years. In the Toyota culture we are brought up t believe that it is a crime to do the same work day after day. We think this accumulation of kaizen creates a foundation that makes kaikaku easier.
On preparation by leadership for IT implementation
In order to be able to use information technology properly at Toyota we had to make certain preparations. We had to commonize our goals and values, standardize our decision making mechanisms, and revisit our management vision.
On information cost
For large scale projects like these, one single large project can cost hundreds of millions of dollars in development. This results in a higher information cost. In Japan an IT investment cost of 2% or 3% of revenue is the limit but in the United States in come cases companies spend as much as 20% or 30% of revenue on IT investment. I wonder whether these companies truly fully utilize their investment. I also wonder how they look at their information cost.
On how to use IT effectively
In order to use IT effectively as a tool, we think that it is important for the top management to not see IT as something that can be applied superficially. First they must see the facts of the business, the facts of the gemba, and on top of this foundation further consider the feelings of people and how to motivate them. Then rules must be written and standardization must be done properly on the basis of the global business framework, before IT is implemented.
The two questions at the end of the meeting minutes were interesting also:
Q) Is it possible for a global company like Toyota to have common values?
A) For Toyota’s products the holding common values means our products have the same quality anywhere in the world. Even if business is done in a differently at a Toyota site overseas, we want people to have common values when delivering Toyota automobiles that bear our logo to our customers. There may be local differences in methodologies, cultures and customs between Toyota operations in different countries. However, if there are variations in Toyota’s values pertaining to customers, our products and our products then we will not succeed as a global brand. We have a certain base of values that are common across our global operations, with modifications or customizations based on laws in each country.
Q) What do you think are the reasons Japan lags behind other countries in IT implementation?
A) There are direct and indirect reasons. First there is the problem of language. Next there is the issue of the mobility of people. The problem of the portability of pensions affected the mobility of people. Because of Japan’s tradition of employment for life, an analog system was sufficient and there was a delay in creating procedure manuals. Since it was not clear what type of work was being done, this delayed IT implementation for this type of work.

You may wonder why a presentation on Toyota’s IT strategy contains so much talk about kaizen, kaikaku, the Toyota Production System and the culture aspect of change. There are several reasons. First, there was more on the business side of IT in the minutes but I found it less interesting and did not post it. Second, it seems to be in the Toyota DNA to talk about things at every opportunity (or at least perhaps in their corporate PR guidelines). Third, remember that this presentation was to a group that included Japanese government officials and no doubt Yoshida took the opportunity to press home some points regarding the importance of kaizen culture to this audience.
More recent news from Toyota’s use of IT can be found on blog posts here and here.

2 Comments

  1. Kent Blumberg

    October 23, 2006 - 6:40 am

    Just read the article about you guys in the Puget Sound business journal. Well done.